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object(Timber\Post)#3711 (44) { ["ImageClass"]=> string(12) "Timber\Image" ["PostClass"]=> string(11) "Timber\Post" ["TermClass"]=> string(11) "Timber\Term" ["object_type"]=> string(4) "post" ["custom"]=> array(5) { ["_wp_attached_file"]=> string(24) "JTF_BondFinancingJTF.pdf" ["wpmf_size"]=> string(6) "135232" ["wpmf_filetype"]=> string(3) "pdf" ["wpmf_order"]=> string(1) "0" ["searchwp_content"]=> string(3917) "1 1 1 PUBLIC BOND FINANCING IN CALIFORNIA JANUARY 2009 ? ? STATE AND LOCAL GOVERNMENTS BORROW MONEY USING BONDS AND SIMILAR FORMS OF DEBT. 1 Bonds1are1like1home1mortgages:1Government1agencies1borrow1a1specific1amount1of1money1which1 then1must1be1repaid1over1time,1usually1many1years.1Bonds1are1generally1used1to1finance1the1cost1of1 building1capital1facilities1such1as1roads,1fire1stations,1flood1protection,1and1schools.1They1are1repaid,1 with1interest,1using1revenues1from1taxes1or1sometimes1from1fees1and1charges.11 ? ? GENERAL OBLIGATION BONDS ARE THE SIMPLEST FORM OF BORROWING. 1 Both1the1state1and1local1governments1issue1general1obligation1(GO)1bonds.1The1state1commits1its1 ?full1faith1and1credit?1to1repay1the1bonds.1Local1governments1raise1property1taxes1as1needed1to1 repay1the1bonds,1as1is1specifically1allowed1under1Proposition113.1State1GO1bonds1must1be1approved1 at1an1election1by1a1majority1of1the1voters.1Local1GO1bonds1must1be1approved1at1an1election1by12/311 of1the1voters1(except1for1school1bonds,1which1require1a155%1majority).11 ? ? STATE AND LOCAL GOVERNMENTS HAVE TECHNIQUES FOR BORROWING WITHOUT VOTER APPROVAL. A1city1could1fund1a1sewage1treatment1plant1by1selling1?revenue1bonds?1backed1by1the1revenues1 from1the1monthly1sewer1fees1paid1by1citizens.1The1state1could1fund1construction1of1a1prison1by1 agreeing1to1lease1the1prison1and1selling1shares1in1the1flow1of1lease1revenue,1an1arrangement1called11 a1lease1revenue1bond,1a1leaseback,1or1certificates1of1participation.1The1state1tends1to1use1revenue11 and1lease1bonds1for1projects1which1are1necessary1but1not1particularly1popular,1such1as1state1office1 buildings1and1prisons.1Governments1typically1pay1higher1rates1when1they1borrow1through1revenue1 bonds1rather1than1general1obligation1bonds.11 ? ? BOTH STATE AND LOCAL GOVERNMENT BORROWING HAS INCREASED IN THIS DECADE. Local1governments,1such1as1cities,1counties,1and1special1districts,1have1borrowed1more1than1the1 state.1They1owed1about1$1601billion1in12005,06,1while1the1state1owed1about1$601billion.1(This1total1 does1not1include1bonds1issued1by1school1districts.)1However,1state1debt1has1grown1more1rapidly1 during1this1decade,1increasing1by1more1than1120%,1compared1to1about132%1for1local1government1 nonschool1debt.1In1addition,1California1voters1have1authorized1the1state1to1issue1another1$571billion.11 ? ? CALIFORNIA?S BOND RATING HAS FALLEN MARKEDLY IN RECENT YEARS. Bonds1are1usually1rated1by1agencies1such1as1Standard1and1Poor?s,1Moody?s,1and1Fitch.1In1general,1 bonds1with1higher1ratings1can1be1sold1for1lower1interest1rates1and1other1costs1than1bonds1with11 lower1ratings.1California1ties1with1Louisiana1for1the1lowest1rating1under1all1three1rating1services,1 largely1because1of1the1state?s1difficulties1in1adopting1a1budget.1The1State1Treasurer1has1challenged1 whether1these1ratings1are1related1to1any1real1risk1that1the1state1will1fail1to1pay1back1the1money1it11 has1borrowed.11 California State and Local Government Borrowing 0 20 40 60 80 100 120 140 160 180 2007-082006-072005-062004-052003-042002-032001-022000-01 Principal Borrowed ($ billions) Cities, counties, and special districts State government California Bond Rating History (Moody?s) Jul 92 Feb92 Oct 89 tOc 80 Sep 72 May01 Sep00 Oct 98 Jul 94 May06 Nov01 Jul05 Aug03 Feb03 May 04 Dec 03 Aaa Aa1 Aa2 Aa3 A1 A2 A3 Baa1 Sources: California State Controller. California State Treasurer. Contact: Dean Misczynski Supported with funding from The William and Flora Hewlett Foundation." } ["___content":protected]=> string(126) "

JTF BondFinancingJTF

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Bonds1are1usually1rated1by1agencies1such1as1Standard1and1Poor?s,1Moody?s,1and1Fitch.1In1general,1 bonds1with1higher1ratings1can1be1sold1for1lower1interest1rates1and1other1costs1than1bonds1with11 lower1ratings.1California1ties1with1Louisiana1for1the1lowest1rating1under1all1three1rating1services,1 largely1because1of1the1state?s1difficulties1in1adopting1a1budget.1The1State1Treasurer1has1challenged1 whether1these1ratings1are1related1to1any1real1risk1that1the1state1will1fail1to1pay1back1the1money1it11 has1borrowed.11 California State and Local Government Borrowing 0 20 40 60 80 100 120 140 160 180 2007-082006-072005-062004-052003-042002-032001-022000-01 Principal Borrowed ($ billions) Cities, counties, and special districts State government California Bond Rating History (Moody?s) Jul 92 Feb92 Oct 89 tOc 80 Sep 72 May01 Sep00 Oct 98 Jul 94 May06 Nov01 Jul05 Aug03 Feb03 May 04 Dec 03 Aaa Aa1 Aa2 Aa3 A1 A2 A3 Baa1 Sources: California State Controller. California State Treasurer. 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